Understanding Elevated Skew in Options Trading

The Long View, institutional investor, posted on X. Elevated skew in options trading indicates that options are priced higher than usual, suggesting a potential opportunity for traders. When the skew is rich, it often leads to increased selling of put options, as traders anticipate a decline in volatility or price movement. This strategy can be beneficial when the market is unlikely to experience significant downturns. Understanding the dynamics of skew can help traders make informed decisions in managing their portfolios.